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Who’s doing what in the crisis?

The recession is a bitter reality for private and public sector organisations alike. Magnus Kuchler, an expert in the FM market, see differences in the way the various sectors are handling the situation.

“The private sector reacts quicker, for better or worse. Many companies have had a good third quarter, but are still putting on the brakes, to be on the safe side. The public sector on the other hand takes a long-term approach and adapts more slowly,” says Magnus Kuchler, responsible for Facility Management consultation in the Nordic region at Ernst & Young.

Kuchler feels that both sectors can learn from each other. The private sector has a lot to gain from thinking long-term and not just focusing on the next quarter. The public sector has to be guided more by value, as this is what the ‘clients’ will be demanding to an increasing extent.

“Many companies that have developed their FM operation over a long period have made a conscious decision and have control over all parts of their operation. They know where they can raise or lower the level of service to get the cost and value right. In the public sector there is a tendency to niggle and fuss, which reduces the value a little in all areas, rather than making good prioritisations and thinking about the bigger picture.”

FM is very much an important support operation in the public sector. Surveys show that good buildings and school food boost pupils’ performance, that hospitals which feel welcoming, function smoothly and have good food have more satisfied patients who recover more quickly. Moreover, the public sector’s core operations will require more resources in the future.

“The trend is that more people need society’s support today, we are living longer, we are ill more often and have increasing unemployment. The organisations need well-educated people to employ, which places demands on the education system. All this costs money that isn’t there, which means the public sector must be more effective without reducing its level of service,” Magnus explains.

Successful change requires investment of both time and money. It is easier for private companies to make large investments which pay for themselves many times over in the longer perspective. The public sector tends to make quick fixes here and there without carrying out any major changes. Furthermore, there is the problem of outsourcing sometimes being erroneously associated with privatisation in the public sector, and that public organisations rarely review all the possible options in their operation and, consequently, have little control over what a service should actually cost.

The private sector is influenced by other factors, according to Magnus.

“There is an unwanted flexibility among clients, who are irregular and can change suppliers quite quickly. This places tough demands on the FM industry which often has long-term contracts and a lot of employees. Moreover, it is necessary to have enough muscle to follow private companies internationally; their FM portfolio must be able to be global.”

Magnus points out that we must remember that the FM industry is still in its infancy and that, irrespective of the economy, clients and suppliers alike will mature with more knowledge and head towards a more professional make or buy strategy. The companies are driven by the insight that they cannot concentrate on everything, and that in many cases it is beneficial for non-core operations to be outsourced.

“It’s a challenge for all FM suppliers to be more proactive about the value they can deliver to the client’s core business, rather than just delivering what has been agreed.”

It is vital to find the right strategy which the company can live with over a long period of time, rather than panicking and doing something hastily and wrongly. “Outsourcing is not a magic pill that works for everyone. If you’re not prepared to embrace change and take control of your operation, you can’t expect outsourcing to solve all the problems,” Magnus says.

What will the economy be like in a year’s time?

“We’ll be back on track again. Everything is faster these days, including recovery.”

What effect is the global financial crisis having on the FM market?

“The companies are carrying out cost-cutting measures which are leading to a decrease in the total purchase volume. Some suppliers will lose their contracts, some employees will lose their jobs. However, many companies are currently reviewing their operations and making changes which will generate more purchases in the long run and will, in turn, develop the FM industry.”